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Transatlantic Free Trade Zone by 2015

European officials welcome President Obama’s proposal to begin negotiations on EU-U.S. free trade

By Valentin Schmid
Epoch Times Staff
Created: February 14, 2013 Last Updated: February 18, 2013
Related articles: Business » Global Markets
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President Barack Obama, flanked by Vice President Joe Biden and House Speaker John Boehner of Ohio, during his State of the Union address in Washington, Feb. 12. Obama proposed beginning negotiations on a transatlantic free trade zone. (Charles Dharapak/AFP/Getty Images)

President Barack Obama, flanked by Vice President Joe Biden and House Speaker John Boehner of Ohio, during his State of the Union address in Washington, Feb. 12. Obama proposed beginning negotiations on a transatlantic free trade zone. (Charles Dharapak/AFP/Getty Images)

President Obama got the ball rolling in his State of the Union address Feb. 12. He proposed to start negotiations about a transatlantic free trade zone. European officials responded favorably to the initiative, which could boost the U.S. and European economies.

[T]rade that is free and fair across the Atlantic supports millions of good-paying American jobs.
-President Barack Obama, State of the Union Address

“I am delighted to announce today that the European Union and the United States have decided to initiate internal procedures to launch negotiations with the aim of reaching a ground-breaking free trade agreement,” Jose Barroso, president of the European Commission, said in a statement Feb. 13.

Officials from the United States and Europe hope that the “Transatlantic Trade and Investment Partnership” will boost growth and jobs on both sides of the Atlantic.

“And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union—because trade that is free and fair across the Atlantic supports millions of good-paying American jobs,” President Obama said in his State of the Union speech Feb. 12.

Free Trade a Win-Win

Free trade, unrestricted by tariffs, quotas and subsidies, is generally thought to be wealth creating. Growth and jobs can be boosted without taking away from others.

In the longer term, a free trade zone also reduces geopolitical strain and fosters cultural exchange. This has been demonstrated both by the North American Free Trade Association (NAFTA) and the European Union, which initially started out as a pure free trade zone after World War II.

Despite the urgency that both sides of the Atlantic have put forward, however, negotiations likely will not be easy. One sticking point, for example, is the agricultural sector. The European Union has a very regulated and subsidized market for agricultural goods. This construct will be hard to resolve, given entrenched interests and a slow political process. On the other hand, U.S. farmers also benefit from state and federal subsidies. Both sectors would take years to adapt to a completely free competitive environment.

Given that the agricultural sector only represents a small part of the economy and is complex to negotiate, the president of the American Chamber of Commerce in Germany, Fred Irwin, said it would be better to leave out agriculture altogether. “The agricultural sector would only weigh on the talks,” he told German newspaper Die Zeit.

Focus on Regulation and Background Barriers

Other sectors, however, could benefit immensely from cost reductions. At this moment, U.S. and European companies often have to conform to two different sets of regulations. According to Barroso, the development of a single regulatory standard could save companies a lot of money.

“So this negotiation will set the standard—not only for our future bilateral trade and investment, including regulatory issues, but also for the development of global trade rules,” Barroso said. He estimates that EU GDP could be boosted by 0.5 percent per year.

U.S. Trade Representative Ron Kirk agrees. “Our tariffs and other conventional barriers to imports are quite low, by global standards, but there are significant restrictions in certain sectors that still inhibit trade. The EU and we also agree that so-called ‘behind the border’ or non-tariff barriers prevent a substantial amount of trade in goods and services,” he told International Trade News.

The European Commission first needs to get the permission to negotiate on behalf of the member countries. Then concrete talks are supposed to commence in the summer of 2013. The European commissioner for trade, Karel de Gucht, hopes that the negotiations can be completed by 2015.

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